Document of The World Bank Public Disclosure Authorized FOR OFFICIAL USE ONLY Report No: 23736 IMPLEMENTATION COMPLETION REPORT (IDA-25630) Public Disclosure Authorized ONA CREDIT IN THE AMOUNT OP SDR 108.4 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A SECOND RED SOILS AREA DEVELOPMENT PROJECT Public Disclosure Authorized March 21, 2002 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective February 2002) Cunrency Unit = Renniinbi (RMB3) Yuan (Y) Yl.0 = US$ 0.12 US$ 1.0 = Y8.3 FISCAL YEAR January I December 31 ABBREVIATIONS AND ACRONYMS ABC Agricultural Bank of China CPI Consumer Price Index CPMO Central Project Management Office ERR Economic Rate of Return FAO/CP FAO and World Bank Cooperative Program FRR Financial Rate of Return ha hectare ICB International Competitive Bidding IMSERC Inner Mongolia Snowstorm Emergency Recovery Component IPM Integrated Pest Management LCB Local Competitive Bidding MOA Ministry of Agriculture MOF Ministry of Finance NCB National Competitive Bidding NPV Net Present Value PLG Project Leading Group PMO Project Management Office PRC People's Republic of China PSR Project Status Report ROE Return on Owner's Equity SAR Staff Appraisal Report SCF Standard Conversion Factor TA Technical Assistance TC Technical Comnmittee TOR Terrns of Reference WTO World Trade Organization Vice President: Jemal-ud-din Kassum, EAPVP Country Manager/Director: Yukon Huang, EACCF Sector Manager/Director: Mark D. Wilson, EASRD Task Team Leader/Task Manager: Achim Fock, EASRD FOR OFFICIAL USE ONLY CHINA SECOND RED SOILS AREA DEVELOPMENT PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings I 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 4 5. Major Factors Affecting Implementation and Outcome 8 6. Sustainability 9 7. Bank and Borrower Perfornance 10 8. Lessons Learned 12 9. Partner Comments 13 10. Additional Information 13 Annex 1. Key Performance Indicators/Log Frame Matrix 21 Annex 2. Project Costs and Financing 22 Annex 3. Economic Costs and Benefits 24 Annex 4. Bank Inputs 25 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 26 Annex 6. Ratings of Bank and Borrower Performance 27 Annex 7. List of Supporting Documents 28 Annex 8. Borrower's ICR Summary 29 Annex 9. Photographs 38 This document has a restricted distribution and may be used by recipients only in the performnance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ProjectID: P003595 ProjectName. SECOND RED SOILS AREA DEV. PROJECT Team Leader: Achim Fock TL Unit: EASRD ICR Type: Core ICR IReport Date: March 21, 2002 1. Project Data Name: SECOND RED SOILS AREA DEV. PROJECT L/C/TF Number: IDA-25630 Country/Department.- CHINA Region: East Asia and Pacific Region Sector/subsector: Al - Irrigation & Drainage; AL - Livestock; AM - Agro-Industry & Marketing; AP - Perennial Crops; AQ - Annual Crops KEY DATES Original Revised/Actual PCD: 01/10/1991 Effective: 06/21/1994 06/21/1994 Appraisal: 06/16/1993 MTR: 05/31/1997 05/13/1997 Approval: 02/03/1994 Closing: 06/30/2001 09/30/2001 Borrower/lmplementingAgency: PRC/MOA Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Gautam S. Kaji Country Manager: Yukon Huang Shahid Javed Burki - Department Director Sector Manager: Mark D. Wilson Joseph R. Goldberg - Division Chief Team Leader at ICR: Achim Fock John Stemp ICR Primary Author: Achim Fock; Xueming Liu 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: HL InstitutionalDevelopment Impact: SU Bank Performance: S Borrower Performance:S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 OriginalObjective: The objective of the project was to increase production and productivity over a wide area of degraded red soils in the provinces of Jiangxi, Fujian, Hunan, Zhejiang, and the Guangxi Autonomous Region; to help alleviate poverty by increasing the income of currently underemployed farmers; and to benefit the environment by improving soil and water conservation, reducing erosion and promoting sustainable land use and agricultural practices. These objectives were in line with the Government's long-term strategies and policies for the agricultural sector as formulated in the early nineties which sought to increase production to meet the requirements created by population growth and to increase income and employment in rural areas. In addition, the objective supported the Bank Group's agricultural sector strategy, as defined in the 1993 CAS, to promote sustainable agricultural development in impoverished and environmentally vulnerable areas and increase and diversify agricultural production. The objectives of the project were clear and well-formulated. They were well designed, consistent with Borrower's and Bank Group's overall strategy at the time of preparation, and supported by the project's stakeholders. 3.2 Revised Objective: The original project objectives remained unchanged. 3.3 Original Components: The project design focused on the transformation of degraded wasteland and semi-wasteland into a productive, sustainable agricultural resource. It built largely on the experience gained under the first 'Red Soils Area Development Project' (Credit 1733-CHA) and centered around a comprehensive development of micro-watersheds with integrated land development, infrastructure, crop and livestock development, buildings, machinery, rural energy, research, training and TA. In addition to this watershed development part of the project, an agro-processing component was designed to utilize and add value to the output of farmers assisted by the project and to increase employment. Specifically, the project had the following 11 original components: (1) Land Development (costs including contingencies US$41.27 million - 13.9% of total). This component lays the foundation of the micro-watershed development by developing land both, on the slopes, mainly through terracing and soil conservation measures, and in the valleys, through the improvement of drainage of paddy fields. The component planned for 22,229 ha of new terrace development and 2,498 ha of terrace rehabilitation, including 21,647 ha of grass/soil conservation measures. In addition, 10,712 ha of paddy rehabilitation plus some bamboo and fishpond development were included. (2) InfrastructureDevelopment (US$32.22 million - 10. 9%). This component was focusing on irrigation for both, upland fields and orchards and lowland paddy fields. The construction of storage facilities such as small reservoirs and ponds, as well as raising of small dams, pumping stations, distribution systems such as pipes and canals, and sprinkler are part of the construction plan. Specifically, the component included the improvement of about 10,700 ha of existing paddy land, and the provision of dry-season irrigation for about 23,700 ha of upland orchards, and fodder and other annual field crops. In addition to the irrigation infrastructure, the component aimed at meeting the additional power requirement for irrigation, agro-processing and domestic lighting by installing transmission lines, and at linking project sites to the existing network of paved country roads by constructing and upgrading about 1,036 km of all-weather gravel roads (class IV standards). In September 2001, about SDR8.052 million of the Credit were allocated to a new 'Inner Mongolia Snowstorm Emergency Recovery Component' (IMSERC) (see Chapter 10). This Component is still under implementation and not part of this ICR. - 2 - (3) Buildings (US$24.24 million - 8.2%). About 623,600 square meters of buildings (excluding those for agro-processing) were planned under this component. This included farmsteads for new settlers (22%), offices, workshops, storage and warehouses, and service and extension centers (16%), and buildings for pigs and other livestock (64%). (4) Machinery and Vehicles (US$14.33 million - 4.8%). This component was designed to provide vehicles to supplement existing fleets to meet the expected demand for transporting project inputs and agricultural produce, including 204 trucks of 5- to 8-ton capacity, 304 trucks of 1.5- to 2-ton capacity and some insulated or refrigerated vans and milk tankers. The design also included the provision of small farm machinery such as two-wheel tractors and power pesticide foggers to specialized contractor households. (5) Crop Establishment (US$92.80 million - 31.3%). This component was designed to provide complete crop establishments in all parts of the micro-watershed under development. About 16,464 ha of fruit trees were planned, most of which peach and plum, citrus (including rehabilitation), chestnut, and longan, lychee and ginkgo. This area was also used for inter-cropping at the early stage of implementation when trees were still sufficiently small. In addition, the component design included 3,353 ha planted to tea, mulberry or grapes, 10,712 ha of improved paddy on the drained fields in the valleys, 13,755 ha of forests (mostly